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Last Night a Shrinkage Saved My Life: Economic Growth, Model Uncertainty and Correlated Regressors

Hofmarcher, Paul and Crespo Cuaresma, Jesus and Grün, Bettina and Hornik, Kurt (2015) Last Night a Shrinkage Saved My Life: Economic Growth, Model Uncertainty and Correlated Regressors. Journal of Forecasting, 34 (2). pp. 133-144. ISSN 02776693

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Abstract

We compare the predictive ability of Bayesian methods which deal simultaneously with model uncertainty and correlated regressors in the framework of cross-country growth regressions. In particular, we assess methods with spike and slab priors combined with different prior specifications for the slope parameters in the slab. Our results indicate that moving away from Gaussian g-priors towards Bayesian ridge, LASSO or elastic net specifications has clear advantages for prediction when dealing with datasets of (potentially highly) correlated regressors, a pervasive characteristic of the data used hitherto in the econometric literature.

Item Type: Article
Additional Information: This is the peer reviewed version of the following article: Hofmarcher P., Crespo Cuaresma J., Grün B., and Hornik K. (2015), Last Night a Shrinkage Saved My Life: Economic Growth, Model Uncertainty and Correlated Regressors, J. Forecast., 34; pages 133-144, which has been published in final form at http://dx.doi.org/10.1002/for.2328.
Divisions: Departments > Finance, Accounting and Statistics > Statistics and Mathematics > Hornik
Departments > Volkswirtschaft > Makroökonomie
Forschungsinstitute > Human Capital and Development
Forschungsinstitute > Rechenintensive Methoden
Kompetenzzentren > Nachhaltigkeit
Version of the Document: Accepted for Publication
Variance from Published Version: Minor
Depositing User: Elena Simukovic
Date Deposited: 06 May 2015 11:12
Last Modified: 06 Aug 2017 13:54
Related URLs:
FIDES Link: https://bach.wu.ac.at/d/research/results/69504/
URI: http://epub.wu.ac.at/id/eprint/4531

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